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Evening markets: crops buck trend, helped by oil to recovery

Once again, a weak start for agricultural commodities gave way to a stronger finish, in Chicago at least – and this time without help from firm external markets.

Indeed many other risks assets, such as

shares

, did the reverse, as a glass half-full approach to huge loans by the European Central Bank to clearing banks gave way to a half-empty approach.

Initially there was joy that the ECB had loaned E490bn to banks, more than the E310bn that had been expected, and meaning more oil in the wheels of the financial system. But that gave way to suspicion as to why so much money was required.

European stocks closed lower, if by sub-1% amounts, with Wall Street shares down 0.3% in late deals.

And the

dollar

recovered to stand 0.2% higher as the euro, naturally, fell back.

Indian lead?

So the default move for risk assets was lower, and indeed many soft commodities ended weakly, with raw

sugar

for March closing down 0.7% at 23.32 cents a pound in New York.

Domestic prices in India, the top consumer of the sweetener, "are softening and perhaps this will be the tone for the coming medium term looking forward and this is not good news for the sugar bulls", Nick Penney at Sucden Financial said.

New York

coffee

for March closed down 1.3% at 219.90 cents a pound, sapped by concerns about pressure from the Central American harvest and a suspicious looking chart which some technical followers believe suggests more drops to come.

While Conab, the Brazilian crop agency, raised its estimate for the completed 2011-12 coffee crop in the top producing country from 43.15m bags to 43.5m bags, a record for an "off" year in the nation's cycle of higher and lower output seasons, that had been factored in.

Port dispute

Cocoa

, however

,

continued its recovery as loose shorts opted to take profits rather than hang on to see if fresh multi-year lows are in the offing.

New York's March lot ended 2.7% higher at $2,244 a tonne, with its London equivalent adding 2.5% to £1,435 a tonne.

Some fundamental support came from a dispute over port fees which has cut exports from Ghana, the second-ranked cocoa producer, to 33,000 tonnes last month, from 90,000 tonnes in October, and remains as yet unresolved.

Heat dispute

And grains were strong too, if not cocoa strong, extending a winning run which has now seen Chicago

soybeans

close up higher for five successive sessions, recovering nearly 5% in the process.

Sure, the concerns about dryness for South American crops appeared to be easing for now, with some rain on its way for needy areas in Argentina and Brazil, and cooler temperatures.

"The possibility of rainfall in Argentina over the course of the next couple of days and the possibility of a rain event seven-to-14 days out likely triggered some profit taking on length held by the speculative community" earlier on, Paul Georgy at Allendale said.

But not all interpretations of the weather outlook were so sanguine.

"The overnight models have backed off of the idea of another round of extreme heat for next week but I am not convinced that this is correct. My forecasts still call for the return for more heat next week," David Tolleris at weather service WxRisk.com said.

Darrell Holaday at Country Futures said: "Near-term forecast do bring some rain through, but it is spotty and the forecast for next week remains generally dry and warm."

'Shorts began to panic'

Certainly, selling pressure from farmers themselves has waned, as US Commodities pointed out, noting that "producers in Brazil have put sales on hold due to the dryness".

But what really revived the market was data showing US crude stockpiles shrinking, a boost to price of both oil and agricultural commodities, such as corn, used in making alternative energy sources.

"It appeared that when the lower openings did not hold, the shorts began to panic and a strong short covering rally pushed futures through some key technical resistance," Darrell Holaday at Country Futures said.

For

corn

, moving above the key technical level of $6.10 a bushel "prompted some additional fund buying that pushed it to a high of $6.19".

The lot ended at $6.16 ½ a bushel, up 1.6% on the day, and the best finish for a spot contract for a month.

And this despite energy data which was mixed for the grain itself, showing production up 5,000 barrels a day last week, to 943,000 barrels a day, but stocks up too, by 605,000 barrels to 17.66m barrels.

Less snow

Soybeans for January closed up 0.8% at $11.53 ¾ a bushel, continuing a steady upward climb, but against weak Chinese crushing margins which have raised concerns for purchases by the top importing country.

Indeed, Chicago

wheat

did better, adding 1.5% to $6.17 a bushel for March, also a one-month closing high, a rise seen as linked to covering of historically hefty short positions before Christmas rather than any particular fundamental concern.

That said, Allendale's Paul Georgy did note that the snow storm in the southern Plains, where seedlings are desperate for moisture, "is not as bad as forecast".

The losers of that outlook were

cattle

, which have risen in Chicago on ideas that the cold weather should mean slower weight gains for animals, besides bringing moisture which will revive pasture and bring ranchers back into buying mode.

Live cattle for December lost 0.2% to 120.35 cents a pound, with the better-traded February lot easing 0.1% to 120.50 cents a pound.

'Not competitive'

In Europe, wheat found headway more difficult too, in part because of the stronger euro for much of the day, but also set back by Toepfer comments that the grain is "not competitive compared to exports from Argentine, Ukraine and Russia".

Indeed, the Black Sea was seen as the favourite to have won a 100,000-wheat order from Jordan, sealed at $280 a tonne including freight.

Paris wheat for March added 0.6% to E184.25 a tonne, with London's May contract shedding 0.2% to £146.00 a tonne.